Political Strife Challenges South Africa's Ports

Durban

By Harry Valentine 2017-05-11 18:44:17

Recent developments in local politics and the international financial world are likely to have an impact on the future of South Africa’s ports. Privatization is an option, but there are many obstacles, and success is not assured.

South Africa’s ports have been state-owned since the days of apartheid when the government appointed political friends to key posts in several government run enterprises that included ports, harbors, railways, power station, airports and the national airline.

The ascension of Nelson Mandela to the post of South Africa’s president gave that nation great hope for the future. However, the present state president, whose actions precipitated the downgrading of South Africa’s currency, faces widespread protest and calls for him to resign from office. His resignation is unlikely, and it is unknown whether either he or South Africa’s new minister of transportation would be open to selling off segments of South Africa’s state-owned transportation related enterprises. 

Given the extent of South African government transportation related holdings, the government could certainly raise a substantial amount of capital from selling off the national airline and several ports. While foreign investment could certainly achieve much in terms of developing a new railway coal line and related port facilities as well as expanding the container terminal at Port of Cape Town, South Africa’s government has instituted many obstacles that could discourage foreign investors. A repeal of some or all of those obstacles could otherwise open the doors for new investment in South Africa from abroad.

South Africa’s Maritime History

The difficulty and high cost of moving good overland between the northern Red Sea and the eastern Mediterranean Sea prompted explorers to seek out an alternate sea route between Europe and the spice rich East Indies. Near the southern tip of Africa, Table Bay offered some protection from the sea and provided easy access to fresh potable water. The hospitable local climate made it possible to grow vegetables and fruit as well as to raise livestock such as cattle, sheep and poultry. Eventually, and as a result of maritime trade, the City and Port of Cape Town developed.
 
While the opening in 1867 of the Suez Canal initially dealt an economic blow to Cape Town, enough trade carried aboard wind-driven ships sailed via the southern tip of Africa and Cape Town remained as an attractive port-of-call. 

When hostilities erupted that threatened the Suez Canal, the voyage via Cape Town remained a viable option during both World War I and World War II. Political hostilities that occurred during 1956 Suez Crisis and the 1967 six-day war reinforced Cape Town’s strategic importance to international shipping. 

During that period, Japanese shipyards began development of larger oil tanker ships.

Oil Trade and South African Ports

During the 1930’s, domestic oil production provided for all of America’s domestic needs, and by the late 1960’s, America was importing large volumes of oil via tanker ship from several Middle Eastern countries. While the largest oil tanker ships could sail near empty through the Suez Canal, their fully laden keel depth required that they sail via the southern tip of Africa. Such was their size that it was more viable to sail a super-giant via Cape Town than a fully-laden smaller Suez-max oil tanker of that era via the Suez Canal to the Gulf of Mexico.

American needed a friendly government at the helm of South Africa to help assure safe passage of laden oil tankers to the Gulf of Mexico. South Africa offered the only deep-sea bays south of the Sahara at Richard’s Bay near Durban and Saldanha Bay near Cape Town. Stricken oil tanker ships could seek refuge in these bays and the then apartheid era government nurtured favorable diplomatic relations with Washington. 

Except that Washington eventually imposed economic sanctions on South Africa to end apartheid then offered South Africa a foreign aid package of over $500-million per annum.

Private Versus State Ports

South Africa is home to Africa’s busiest container port at Durban that serves as the gateway to Southern Africa’s very populous financial district of Johannesburg and surrounding Gauteng region. While the overland connection between Johannesburg and Durban is operating near capacity, an alternative and shorter overland connection is possible between Johannesburg and Port of Maputo where DP-ports operates the container terminal. 

There is much potential for future foreign investment and subsequent future infrastructure development at Maputo, including at the port area. At present, South Africa’s government restricts foreign investment for mainly political reasons.

Several bond rating agencies recently downgraded South Africa’s currency in response to the recent dismissal of the nation’s highly respected finance minister. The appointment of a new finance minister, who at present has little credibility in international financial world, resulted in the downgrade. 

The recent downgrading and dismissal prompted massive public protests against the nation’s president and calls for him to resign. South Africa is likely to endure an extended period of ongoing political unrest while their currency falters. 

It is possible that events that followed Greece’s economic down could occur in South Africa in the form of calls from the international financial community that the government sells off some of its state-owned or parasitic enterprises. These enterprises include maritime ports, the airline company, the national broadcaster and some heavily-used rail ore lines.

Potentially Viable Port Investment

South Africa is a major exporter of mined ores such as manganese, iron ore and coal. There is the prospect of South Africa being able to increase coal exports from the northeastern region providing that a new railway line and additional deep-sea port facilities were to be developed between Durban and Richard’s Bay. An extreme heavy-haul railway line extends from South Africa’s interior and carries iron ore into the Port of Saldanha Bay. South Africa’s economy depends on export of natural resources from the nation’s mines to overseas markets to earn income from foreign sources.

South Africa’s busiest container ports are Durban and Cape Town respectively, and both ports could attract foreign investors. The entrance to Port of Durban would have to be revised to resolve the recurring problem of buildup of silt at the port entrance. Port expansion in Brazil would result in mega-size container ships sailing by Cape Town on voyages to and from Asia. 

Foreign investment could expand Port of Cape Town to berth such ships. However, South Africa’s present regime would likely resist any pressure brought upon it by the international financial sector to sell off state enterprises. 

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.

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